Apple favoring sole-source parts for Apple Watch, adding to supply constraints

Posted:
in Apple Watch edited May 2015
Apple is without a backup supplier for many components in the new Apple Watch, a new analysis has discovered, revealing an unusual move for a company that generally works to secure options in its supply chain.




Investment firm UBS took apart the Apple Watch to get a better idea of the supply chain behind Apple's new wrist-worn device, and found that Apple is favoring sole-sourcing for "many components."

In particular, LG Display is said to be the sole supplier for the OLED display, while TPK is the only company providing the touch sensor and lamination for the Apple Watch. In addition, USI Shanghai is the lone supplier for the systems-in-package, including the application processor and memory.

Analyst Nicholas Gaudois noted that this approach is atypical for Apple, as the company usually prefers to have multiple suppliers for key components. Doing so gives Apple the flexibility to deal with yield or production issues, and also helps to drive down prices.




Apple Chief Executive Tim Cook is known as an operations genius, flexing his supply chain might to quickly produce millions of iPhones in a short amount of time for major product launches. But the debut for the Apple Watch has been very different, with initial supply selling out immediately, and most orders yet to ship to customers, even though the product was announced well ahead of launch.

It's likely that the new technology introduced in the diminutive Apple Watch has played a part in Apple using just one company to provide certain key components for the device.

UBS also found that Broadcom is the only supplier for wireless connectivity components, Maxim is the sole company responsible for the heart rate monitor, and ADI is the lone provider of the touch panel controller. Responsibilities for the Apple Watch's "taptic engine" motor are said to be split between AAC and Nidec.
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Comments

  • Reply 1 of 49
    jkichlinejkichline Posts: 1,319member
    Probably a smart move for a new product to control quality and variability in a new OS with required integration.
  • Reply 2 of 49
    vfx2k4vfx2k4 Posts: 43member
    I'm sure the engineering geniuses at UBS understand Apple's supply chain gameplan better than they do. Not.
  • Reply 3 of 49
    SpamSandwichSpamSandwich Posts: 30,578member
    ????
  • Reply 4 of 49
    More importantly is the lack of Samsung from the mix! Hopefully Apple can keep them out of the supply chain for the apple watch, especially for he S1 processor
  • Reply 5 of 49

    I could not care less about these constant stories about why Apple Watches are still as rare as a snowless New York winter. To me Apple failed miserably with this launch when people who ordered minutes after the pre-order period started still not have received theirs almost three weeks after the official launch date.

    Now I know some will say I am just an impatient customer. I did not even order mine as early. I took it for a spin in the store and ordered on April 30th. So I do not hold my breath getting it anytime before the end of June at the earliest. But I took that chance by waiting with my order. Having people wait so long who actually bought something they did not even get to look at before, risks damaging the brand which was known not just for great products but also great product roll-outs.

     

    Sorry for the rant. I just hope this was a one-time fumble that will not repeat itself.

  • Reply 6 of 49
    Quote:
    Originally Posted by Sebastian37 View Post

     

    risks damaging the brand which was known not just for great products but also great product roll-outs.

     

    Sorry for the rant. I just hope this was a one-time fumble that will not repeat itself.


    LOL. Right. You're definitely well-informed.

     

    Let's see, the Wallstreet PowerBook G3's...plagued by shipping issues, hardware defects, finally they had to release the "PDQ" model to alleviate the issues and try to get things back on track.

    The Power Mac G4, initially was to ship at 400/450/500MHz speeds. Guess what? Motorola couldn't get the chips done, so Apple speed dumped the machines, without lowering the prices. Paid for a 500MHz unit? You got 450MHz instead, at the price the 500MHz cost.

    The Power Macintosh 8600 and 9600's top end models were delayed for months due to supply issues with the 604ev Mach V processors.

     

    Guess what? All of that happened under Jobs! And all of it was with seriously new technology at the time. Things happen.

  • Reply 7 of 49
    rogifanrogifan Posts: 10,669member
    I'm curious how an investment firm would know if someone is the sole supplier for a component or not. I highly doubt Apple is giving up that kind of information so where are they getting it from?
  • Reply 8 of 49
    peterjh3peterjh3 Posts: 15member
    Quote:

    Originally Posted by Sebastian37 View Post

     

    I could not care less about these constant stories about why Apple Watches are still as rare as a snowless New York winter. To me Apple failed miserably with this launch when people who ordered minutes after the pre-order period started still not have received theirs almost three weeks after the official launch date.

    Now I know some will say I am just an impatient customer. I did not even order mine as early. I took it for a spin in the store and ordered on April 30th. So I do not hold my breath getting it anytime before the end of June at the earliest. But I took that chance by waiting with my order. Having people wait so long who actually bought something they did not even get to look at before, risks damaging the brand which was known not just for great products but also great product roll-outs.

     

    Sorry for the rant. I just hope this was a one-time fumble that will not repeat itself.


    I ordered within minutes of the launch at 1am MT. I cancelled it this past weekend when my date range of 4/24-5/08 came and went. Completely disappointed in this launch by Apple. As an early adopter, my excitement and interest plummeted quicker than the first round of Watches shipped.

  • Reply 9 of 49
    stanhopestanhope Posts: 141member
    The "launch" of the Apple watch was/is a horror. It has nothing to do with customer impatience it has to do with customer service, integrity and goodwill. The rollout comes across as confused on the one hand and elitist on the other. I have my Apple watch. The angst I went through to get it was profoundly unnecessary. Customers who have been loyal to the Apple brand from the onset were cast aside in favor of some fashionistas who went to Maxfields to buy on launch day. If I want to stand in line to buy a product,my hat should be my option not some plaid clad chick whose understanding of the core Apple customer seems nonexistent . The Apple staff was often misinformed and gave out information that turned out to be flat wrong......and for what? Jony Ive's team is responsible for a sensational product. Angela Ahrendts put a moustache on a Mona Lisa.
  • Reply 10 of 49
    capnbobcapnbob Posts: 386member
    Quote:

    Originally Posted by stanhope View Post



    The "launch" of the Apple watch was/is a horror. It has nothing to do with customer impatience it has to do with customer service, integrity and goodwill. The rollout comes across as confused on the one hand and elitist on the other. I have my Apple watch. The angst I went through to get it was profoundly unnecessary. Customers who have been loyal to the Apple brand from the onset were cast aside in favor of some fashionistas who went to Maxfields to buy on launch day. If I want to stand in line to buy a product,my hat should be my option not some plaid clad chick whose understanding of the core Apple customer seems nonexistent . The Apple staff was often misinformed and gave out information that turned out to be flat wrong......and for what? Jony Ive's team is responsible for a sensational product. Angela Ahrendts put a moustache on a Mona Lisa.



    Wow - your angst is your own business. Any absurd store line based sales approach would have made many more people much more disappointed than ordering on 4/10 and seeing the delivery window. We don't know how many people got the early watches... maybe it was 1M... that would be a pretty impressive launch regardless of your experience. Shop-based lines are now owned by the Asian reseller chain and have no place in an Apple product launch any more. Face it, this was a massively oversubscribed launch for a product that appears to have had no small teething troubles in production at the last minute. Hardly marketing's fault. Sounds like Supply Chain gave them a hospital pass. In fact, the well subscribed try-on sessions at Apple stores since 4/10 is unprecedented in a new product launch and quite the innovation IMHO.

     

    PS I got mine yesterday near the beginning of my window (5/10-24). I'm fine with that.

     

    Also - anyone who proclaims themselves the core Apple customer clearly has issues. Apple "loyalists" who frequent these boards haven't been Apple's core customer in a decade... early adopter does not equal significant revenue share for Apple.

  • Reply 11 of 49
    sflocalsflocal Posts: 4,396member

    I'm waiting to buy the new iMac with the Skylake CPU.  Can I rant and blame Apple for bungling this even though I know it's actually Intel's fault for being so far behind?  No, I prefer to be patient and understanding of the circumstances and I will not whine about first-world problems. 



    The watch is a brand new category.  Of course, Apple is going to have issues getting a gazillion of them shipped out.  What will happen is that this will be a distant memory soon, and then people will just find something else to whine about.

  • Reply 12 of 49
    mjtomlinmjtomlin Posts: 1,793member
    Quote:

    Originally Posted by stanhope View Post



    Customers who have been loyal to the Apple brand from the onset were cast aside in favor of some fashionistas who went to Maxfields to buy on launch day. 

     

    Give me a break. You come across as a self-important whiner... as if Apple should've catered to your needs over their release plans. Sorry, but Apple obviously allocated X amount for pre-order and others for release in a few select high fashions outlets. The fact that you find this ridiculous and that Apple is somehow dissing you, makes you even more pretentious than the people who shop as those retail outlets.

  • Reply 13 of 49
    lkrupplkrupp Posts: 6,615member
    Quote:

    Originally Posted by Spanading View Post



    More importantly is the lack of Samsung from the mix! Hopefully Apple can keep them out of the supply chain for the apple watch, especially for he S1 processor



    If Samsung can manufacture the S1 more reliably and more cost effectively than other suppliers Apple should use them. Business is business and rivalry be damned.

  • Reply 14 of 49
    isteelersisteelers Posts: 738member
    LOL. Right. You're definitely well-informed.

    Let's see, the Wallstreet PowerBook G3's...plagued by shipping issues, hardware defects, finally they had to release the "PDQ" model to alleviate the issues and try to get things back on track.
    The Power Mac G4, initially was to ship at 400/450/500MHz speeds. Guess what? Motorola couldn't get the chips done, so Apple speed dumped the machines, without lowering the prices. Paid for a 500MHz unit? You got 450MHz instead, at the price the 500MHz cost.
    The Power Macintosh 8600 and 9600's top end models were delayed for months due to supply issues with the 604ev Mach V processors.

    Guess what? All of that happened under Jobs! And all of it was with seriously new technology at the time. Things happen.

    Your last sentence sums it up quite nicely, things happen. People need to relax. So Apple handed a few out to high profile people, it's not likely that had any impact on the availability. If the reports about the haptic engine issues were true, this would explain a lot, but either way it's just a matter of demand outstripping supply. Apple will ramp up production and peolple will get their watches.
  • Reply 15 of 49
    flaneurflaneur Posts: 4,495member
    stanhope wrote: »
    The "launch" of the Apple watch was/is a horror. It has nothing to do with customer impatience it has to do with customer service, integrity and goodwill. The rollout comes across as confused on the one hand and elitist on the other. I have my Apple watch. The angst I went through to get it was profoundly unnecessary. Customers who have been loyal to the Apple brand from the onset were cast aside in favor of some fashionistas who went to Maxfields to buy on launch day. If I want to stand in line to buy a product,my hat should be my option not some plaid clad chick whose understanding of the core Apple customer seems nonexistent . The Apple staff was often misinformed and gave out information that turned out to be flat wrong......and for what? Jony Ive's team is responsible for a sensational product. Angela Ahrendts put a moustache on a Mona Lisa.

    Stopped caring about you when I got to "angst." Grow up. Started really disliking your attitude when I got to "plaid clad chick."

    The "horror" you speak of is in your head.
  • Reply 16 of 49
    nolamacguynolamacguy Posts: 4,758member
    I could not care less about these constant stories about why Apple Watches are still as rare as a snowless New York winter. To me Apple failed miserably with this launch when people who ordered minutes after the pre-order period started still not have received theirs almost three weeks after the official launch date.
    Now I know some will say I am just an impatient customer. I did not even order mine as early. I took it for a spin in the store and ordered on April 30th. So I do not hold my breath getting it anytime before the end of June at the earliest. But I took that chance by waiting with my order. Having people wait so long who actually bought something they did not even get to look at before, risks damaging the brand which was known not just for great products but also great product roll-outs.

    Sorry for the rant. I just hope this was a one-time fumble that will not repeat itself.

    doom! DOOOOOM!!!

    if having up to an estimated 1.3 - 3 million orders of my product before its even launched is a miserable failure, sign my company up -- id love to fail so spectacularly. id cry all the way to the bank, depositing my gobs of money.

    we got ours, sorry your life is still full of hardship.
    .
  • Reply 17 of 49
    nolamacguynolamacguy Posts: 4,758member
    stanhope wrote: »
    The "launch" of the Apple watch was/is a horror. It has nothing to do with customer impatience it has to do with customer service, integrity and goodwill. The rollout comes across as confused on the one hand and elitist on the other. I have my Apple watch. The angst I went through to get it was profoundly unnecessary. Customers who have been loyal to the Apple brand from the onset were cast aside in favor of some fashionistas who went to Maxfields to buy on launch day. If I want to stand in line to buy a product,my hat should be my option not some plaid clad chick whose understanding of the core Apple customer seems nonexistent . The Apple staff was often misinformed and gave out information that turned out to be flat wrong......and for what? Jony Ive's team is responsible for a sensational product. Angela Ahrendts put a moustache on a Mona Lisa.

    what nonsense.

    the only thing profoundly unnecessary is the "angst" you put yourself thru while waiting to receive your item, delivered on time. seriously take a moment and put your life in perspective.

    also, please back up your oh-so-trendy claim that the nefarious "fashionistas" have usurped your position waiting in line? because from the stories posted to this site, its mostly apple fans and scummy scalpers that have been waiting in line.

    what false info did apple staff give out? Ahrendts sent memos to her staff stating the AW wouldnt be sold in Apple stores until they had sufficient inventory to stock those hundreds of stores. that has nothing to do w/ any launch deals Apple may have made w/ partner resellers, who can be counted on one hand.
  • Reply 18 of 49
    radarthekatradarthekat Posts: 2,928moderator
    First, reports of the haptic engine issues stated that units from one supplier were at issue and that none of those units actually shipped to end customers, that Apple had caught the issue in time and was shipping only the units from the other supplier. Now we're to believe that Apple has engineered their supply chain with only single suppliers for each component. UBS clearly knows nothing of what they speak.
  • Reply 19 of 49
    nolamacguy wrote: »
    doom! DOOOOOM!!!


    if having up to an estimated 1.3 - 3 million orders of my product before its even launched is a miserable failure, sign my company up -- id love to fail so spectacularly. id cry all the way to the bank, depositing my gobs of money.

    we got ours, sorry your life is still full of hardship.
    .

    Wow. And I thought I went over the top. You imply all kinds of things I never mentioned. I will still wait for my Apple Watch. No hardship. But as a company I bet Apple wished for a better launch.
  • Reply 20 of 49
    rogifanrogifan Posts: 10,669member
    First, reports of the haptic engine issues stated that units from one supplier were at issue and that none of those units actually shipped to end customers, that Apple had caught the issue in time and was shipping only the units from the other supplier. Now we're to believe that Apple has engineered their supply chain with only single suppliers for each component. UBS clearly knows nothing of what they speak.

    Yep. I find this report highly skeptical. And as I asked earlier, how would an analyst from UBS know whether Apple had multiple sources for a component or not?
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